Tether Settles Celsius Lawsuit Amid Growing Scrutiny of Its Reserve

Tether, the issuer of the world’s largest stablecoin USDT, has agreed to a $299.5 million settlement with the administrators of the bankrupt crypto lender Celsius Network, a move that highlights ongoing concerns about the firm’s reserve composition and its expanding role as a lender in the digital‑asset market [2].

Key takeaways

• Tether settled the Celsius lawsuit for $299.5 million, a fraction of the $4 billion claimed by the lender [2].
• The settlement follows accusations that Tether liquidated roughly 40,000 BTC collateral without the ten‑hour notice required by the loan agreement [2].
• Tether’s “secured loans” rose to $10.1 billion in its Q2 reserve attestation, despite earlier promises to eliminate such assets [2].
• Critics allege Tether operates like a de facto central bank for Bitcoin, with a history of alleged reserve overstatement and regulatory fines [1].
• The firm’s growing exposure to U.S. Treasury bills and its $181 billion USDT circulation have drawn heightened regulatory attention [1].

Settlement with Celsius and Its Implications

On October 14, the Blockchain Recovery Investment Consortium (BRIC) announced a $299.5 million settlement with Tether, ending a lawsuit filed in August 2024 by Celsius’s administrators after the lender’s 2022 bankruptcy [2]. The dispute centered on Tether’s liquidation of about 40,000 BTC that Celsius had pledged as collateral for USDT‑based loans. Celsius argued that Tether bypassed a contractual ten‑hour waiting period after a margin call, accelerating its collapse. The U.S. Bankruptcy Court in the Southern District of New York rejected Tether’s attempt to dismiss the case in July, leading to the settlement [2].

While the settlement amount represents only a small slice of the over $4 billion Celsius claimed it was owed, it underscores Tether’s position as the largest lender in the digital‑asset space. Analysts note that Tether’s lending activities have raised questions about the soundness of the fiat reserves backing the $181 billion worth of USDT in circulation [2].

Growing Concerns Over Tether’s Reserve Composition

Tether’s reserve disclosures have long been a point of contention. In 2021, the New York Attorney General fined Tether’s parent iFinex for overstating reserves and hiding roughly $850 million in losses [1]. More recently, Tether’s quarterly “attestation” revealed that secured loans grew to $10.1 billion, contradicting a prior pledge to eliminate such loans from its balance sheet three years earlier [2]. Critics describe this as a departure from the typical stablecoin model, which relies primarily on U.S. Treasury bills and cash deposits.

The firm’s extensive holdings in U.S. Treasury bills—reportedly making it the 22nd largest global buyer—have positioned Tether as a quasi‑central bank for Bitcoin, a role that some observers argue gives it the power to influence market liquidity and pricing [1]. Allegations of past misconduct, including fines and accusations of misrepresenting reserve assets, continue to fuel regulatory scrutiny.